Hello Freinds,
I need your help for the follwing assignment.Pl help me.
Subject:Linking Business strategies with HR Strategies.
1.What is the imp of Strategies.
2.How do we link them?
3.Problems in Linking with Hr ?
4.Solutions to the problems of linkage.
5.Merits of Linkage.
6.Future Trends in Business Strategies.
Regards,
Rohan Kelkar.
9890305432.
From India, Mumbai
7I need your help for the follwing assignment.Pl help me.
Subject:Linking Business strategies with HR Strategies.
1.What is the imp of Strategies.
2.How do we link them?
3.Problems in Linking with Hr ?
4.Solutions to the problems of linkage.
5.Merits of Linkage.
6.Future Trends in Business Strategies.
Regards,
Rohan Kelkar.
9890305432.
From India, Mumbai
1.What is the imp of Strategies.
STRATEGIES mean actionable directions set by management for the
company. It consists of competitive moves and business approaches
to produce successful performance.
It is important because it helps to set up
-game plan for running the business
-strengthening the co.'s competitive position
-set up vision direction
-set up mission statement
-setting objectives
-crafting operating strategies
-implmentation strategy
etc.
IT HELPS TO ANSWER 3 QUESTIONS
1. WHERE ARE WE NOW
2.WHERE DO WE WANT TO BE IN 'X' YEARS
3.HOW DO WE GET THERE.
================================================== ===
2.How do we link them?
HR ALIGNMENT WITH CORPORATE OBJECTIVES / STRATEGY
In most companies, HRM is part of senior management.
HRM makes contribution to the development of
-corporate mission statement
-corporate objectives
-corporate strategy.
Normally the senior management team or TOP management would
consists of
-ceo or managing director
-corporate planning manager
-finance manager
-marketing manager
-manufacturing manager
-sales manager
-supply chain manager
-HR manager
etc.
STEP 1[a]
TOP management would
-evaluate the current [ last 12 months] performance against the
objectives / target set previously, which includes return on investment,
profitability , etc and also the performance of various departments
like marketing, sales, HR, manufacturing, etc etc.
STEP 1 [b]
TOP management will also evaluate the current mission,objectives,
strategies and policies.
-----------------------------------------------
STEP 2[a ]
CEO or MD will take the summary of the evaluation of the current
performance to the board for review.
STEP 2 [ b ]
Based on the review plus the external environmental factors,
the board will make decisions on
-new mission statement
-new corporate objectives
-new corporate governance
-------------------------------------------------------------
STEP 3 [ a ]
TOP management will scan and assess the company's
external environment --political/ economic/social/ technology.
to determine the strategic factors that pose as
OPPORTUNITIES / THREATS.
STEP 3 [ b ]
TOP management will scan and assess the company's
internal environment --structure/ culture/resources etc
to determine the strategic factors that pose as
OPPORTUNITIES / THREATS.
STEP 3[ c ]
TOP MANAGEMENT will analyze the the strengths / weaknesses
of the organization and pinpoint the problems areas that needs
attention and the strengths that could be exploited.
STEP 4
Based on the above analyses, TOP management will generate,
evaluate, and select the best strategic factors.
STEP 5
TOP management will review and revise [ if necessary ] the
mission statement and corporate objectives.
STEP 6
TOP management will generate and evaluate strategy alternatives
and objectives.
STEP 7
This final corporate mission statement, objectives and strategies
becomes the foundation information for the various departments
to work out their departmental objectives/strategies/plans.
STEP 8
After working out their respective objectives/strategies/plans
and the budgets , the departmental managers send their
respective information to the TOP management for
approval.
STEP 9
On receiving the approved package from the TOP management,
the departmental managers develop the implementation plan.
STEP 10.
NOW you have
mission/objectives/strategies/plans/budget/schedules.
================================================== ====
IN case of HR, which is a department by itself,
This final corporate mission statement, objectives and strategies
becomes the foundation information for the HR department
to work out your departmental objectives/strategies/plans.
But bulk of HR activities / plans are linked/ based on the
HR NEEDS of other departments.
STEP A
Discuss with the various other departments like sales/ production/
distribution/accounting/ IT etc about their requirements
-for manpower
-recruitments
-replacements
-training
etc etc
Once you get their departmental requirements, HRM develops
-recruitment /selection plans / programs/ procedures/ priorities
-training plans / programs/ procedures/ priorities
-rewards plans / programs/ procedures/ priorities
-development plans / programs/ procedures/ priorities
-payroll plans / programs/ procedures/ priorities
- performance management plans / programs/ procedures/ priorities
-staff/organization communication plans / programs/ procedures/ priorities
etc etc
WHICH IS CONVERTED INTO COMPANY
-HR POLICIES
-HR PROCEDURES
-HR PRACTICES.
-HR PLANS
ETC.
===============================================
Example of HR ALIGNING with CORPORATE OBJECTIVE.
Corporate Strategy: Expand into the global market.
Corporate Objective: Phase 1 enter the european market.
Obtain 2% of the market in the first 18 months.
----------------------------------------------------------------- --------------------
Marketing Objective : Gain 2 % market share in the first 18 months.
Marketing Strategy : Develop new products .
Develop product promotions, with mutilingual
media plan.
Marketing Needs: *Key employees will need to be able to communicate
in a second language of europe.
*Product managers need orientation in european
culture.
HR contribution: *Language training.
*European culture orientation
*European economy orientation
----------------------------------------------------------------- --------------------
Sales Objective : Gain Sales of $X in the first 18 months.
Sales Strategy : *Sell current products in euro market
*Sell new products in euro market.
*Determine new market segments.
*Develop a range of KEY accounts.
Sales Needs: *Key employees will need to be able to communicate
in a second language of europe.
*Sales managers/team need orientation in european
culture.
*Sales managers/team need orientation in european
economy.
*Sales team need sales skills/ approach.
*Sales team need an understanding of
euro customer buying pattern.
*New sales team recruitment.
HR contribution: *Language training.
*European culture orientation
*European economy orientation
*Euro market orientation.
*Euro selling skills
*Euro customer servicing orientation.
----------------------------------------------------------------- --------------------
Now as a HR manager, you know
-what the corporate objectives/ strategies are.
-what the marketing / sales objectives / strategies are
-what the marketing /sales needs are
-what the HR contribution should be
and also what/ how your HR plans impact the
business results.
----------------------------------------------------------------- ---------
In this way, you can carry out for other departments in the
organization, like
-production
-procurement
-supply chain
-warehousing
-customer servicing
etc etc.
NOW YOU HAVE LINKED ALL DEPARTMENTS
STRATEGIES TO HR STRATEGY AND HENCE
THE COMPANY STRATEGY.
================================================== ==
3.Problems in Linking with Hr ?
Problems arises , often, due
-lack of clear top management objectives
-lack of clear top management strategy
-lack of clear top management support
-lack of senior management collaboration
-lack of senior management coordination
-lack of HR initiatives
etc
========================================
4.Solutions to the problems of linkage.
-TOP MANAGEMENT SUPPORT
-SENIOR MANAGEMENT COLLABORATION
-HRM INITIATIVES / COORDINATION
=======================================
5.Merits of Linkage. FROM A HR point of view
-effective HR planning
-effective MANPOWER planning
-quality personnel
-quantity of personnel
-effective training
-sufficient training
-effective/ efficient selection / recruitment
-competitive compensation package
-effective sucession planning
-effective career planning
-timely promotions
-effective/ timely performance management
etc etc
which leads the company to a successful outcome
-productivity gain
-profitability gain.
=====================================
6.Future Trends in Business Strategies.
-more customer orientation
-more technology based
-globalization
-HR outsourcing
etc etc
WISH YOU A HAPPY NEW YEAR
REGARDS
LEO LINGHAM
regards
From India, Mumbai
STRATEGIES mean actionable directions set by management for the
company. It consists of competitive moves and business approaches
to produce successful performance.
It is important because it helps to set up
-game plan for running the business
-strengthening the co.'s competitive position
-set up vision direction
-set up mission statement
-setting objectives
-crafting operating strategies
-implmentation strategy
etc.
IT HELPS TO ANSWER 3 QUESTIONS
1. WHERE ARE WE NOW
2.WHERE DO WE WANT TO BE IN 'X' YEARS
3.HOW DO WE GET THERE.
================================================== ===
2.How do we link them?
HR ALIGNMENT WITH CORPORATE OBJECTIVES / STRATEGY
In most companies, HRM is part of senior management.
HRM makes contribution to the development of
-corporate mission statement
-corporate objectives
-corporate strategy.
Normally the senior management team or TOP management would
consists of
-ceo or managing director
-corporate planning manager
-finance manager
-marketing manager
-manufacturing manager
-sales manager
-supply chain manager
-HR manager
etc.
STEP 1[a]
TOP management would
-evaluate the current [ last 12 months] performance against the
objectives / target set previously, which includes return on investment,
profitability , etc and also the performance of various departments
like marketing, sales, HR, manufacturing, etc etc.
STEP 1 [b]
TOP management will also evaluate the current mission,objectives,
strategies and policies.
-----------------------------------------------
STEP 2[a ]
CEO or MD will take the summary of the evaluation of the current
performance to the board for review.
STEP 2 [ b ]
Based on the review plus the external environmental factors,
the board will make decisions on
-new mission statement
-new corporate objectives
-new corporate governance
-------------------------------------------------------------
STEP 3 [ a ]
TOP management will scan and assess the company's
external environment --political/ economic/social/ technology.
to determine the strategic factors that pose as
OPPORTUNITIES / THREATS.
STEP 3 [ b ]
TOP management will scan and assess the company's
internal environment --structure/ culture/resources etc
to determine the strategic factors that pose as
OPPORTUNITIES / THREATS.
STEP 3[ c ]
TOP MANAGEMENT will analyze the the strengths / weaknesses
of the organization and pinpoint the problems areas that needs
attention and the strengths that could be exploited.
STEP 4
Based on the above analyses, TOP management will generate,
evaluate, and select the best strategic factors.
STEP 5
TOP management will review and revise [ if necessary ] the
mission statement and corporate objectives.
STEP 6
TOP management will generate and evaluate strategy alternatives
and objectives.
STEP 7
This final corporate mission statement, objectives and strategies
becomes the foundation information for the various departments
to work out their departmental objectives/strategies/plans.
STEP 8
After working out their respective objectives/strategies/plans
and the budgets , the departmental managers send their
respective information to the TOP management for
approval.
STEP 9
On receiving the approved package from the TOP management,
the departmental managers develop the implementation plan.
STEP 10.
NOW you have
mission/objectives/strategies/plans/budget/schedules.
================================================== ====
IN case of HR, which is a department by itself,
This final corporate mission statement, objectives and strategies
becomes the foundation information for the HR department
to work out your departmental objectives/strategies/plans.
But bulk of HR activities / plans are linked/ based on the
HR NEEDS of other departments.
STEP A
Discuss with the various other departments like sales/ production/
distribution/accounting/ IT etc about their requirements
-for manpower
-recruitments
-replacements
-training
etc etc
Once you get their departmental requirements, HRM develops
-recruitment /selection plans / programs/ procedures/ priorities
-training plans / programs/ procedures/ priorities
-rewards plans / programs/ procedures/ priorities
-development plans / programs/ procedures/ priorities
-payroll plans / programs/ procedures/ priorities
- performance management plans / programs/ procedures/ priorities
-staff/organization communication plans / programs/ procedures/ priorities
etc etc
WHICH IS CONVERTED INTO COMPANY
-HR POLICIES
-HR PROCEDURES
-HR PRACTICES.
-HR PLANS
ETC.
===============================================
Example of HR ALIGNING with CORPORATE OBJECTIVE.
Corporate Strategy: Expand into the global market.
Corporate Objective: Phase 1 enter the european market.
Obtain 2% of the market in the first 18 months.
----------------------------------------------------------------- --------------------
Marketing Objective : Gain 2 % market share in the first 18 months.
Marketing Strategy : Develop new products .
Develop product promotions, with mutilingual
media plan.
Marketing Needs: *Key employees will need to be able to communicate
in a second language of europe.
*Product managers need orientation in european
culture.
HR contribution: *Language training.
*European culture orientation
*European economy orientation
----------------------------------------------------------------- --------------------
Sales Objective : Gain Sales of $X in the first 18 months.
Sales Strategy : *Sell current products in euro market
*Sell new products in euro market.
*Determine new market segments.
*Develop a range of KEY accounts.
Sales Needs: *Key employees will need to be able to communicate
in a second language of europe.
*Sales managers/team need orientation in european
culture.
*Sales managers/team need orientation in european
economy.
*Sales team need sales skills/ approach.
*Sales team need an understanding of
euro customer buying pattern.
*New sales team recruitment.
HR contribution: *Language training.
*European culture orientation
*European economy orientation
*Euro market orientation.
*Euro selling skills
*Euro customer servicing orientation.
----------------------------------------------------------------- --------------------
Now as a HR manager, you know
-what the corporate objectives/ strategies are.
-what the marketing / sales objectives / strategies are
-what the marketing /sales needs are
-what the HR contribution should be
and also what/ how your HR plans impact the
business results.
----------------------------------------------------------------- ---------
In this way, you can carry out for other departments in the
organization, like
-production
-procurement
-supply chain
-warehousing
-customer servicing
etc etc.
NOW YOU HAVE LINKED ALL DEPARTMENTS
STRATEGIES TO HR STRATEGY AND HENCE
THE COMPANY STRATEGY.
================================================== ==
3.Problems in Linking with Hr ?
Problems arises , often, due
-lack of clear top management objectives
-lack of clear top management strategy
-lack of clear top management support
-lack of senior management collaboration
-lack of senior management coordination
-lack of HR initiatives
etc
========================================
4.Solutions to the problems of linkage.
-TOP MANAGEMENT SUPPORT
-SENIOR MANAGEMENT COLLABORATION
-HRM INITIATIVES / COORDINATION
=======================================
5.Merits of Linkage. FROM A HR point of view
-effective HR planning
-effective MANPOWER planning
-quality personnel
-quantity of personnel
-effective training
-sufficient training
-effective/ efficient selection / recruitment
-competitive compensation package
-effective sucession planning
-effective career planning
-timely promotions
-effective/ timely performance management
etc etc
which leads the company to a successful outcome
-productivity gain
-profitability gain.
=====================================
6.Future Trends in Business Strategies.
-more customer orientation
-more technology based
-globalization
-HR outsourcing
etc etc
WISH YOU A HAPPY NEW YEAR
REGARDS
LEO LINGHAM
regards
From India, Mumbai
Dear Leo, You are just onederful. Always ready to make things clear. CiteHr celebrates u as the man of the year soon the HR world will celebrate you as the man of the year. Kudos MoPrecious
From Nigeria
From Nigeria
Dear All,
Leo's artilcle is really great and taking it further, bellow find a detail on Balance score card approach
BALANCED SCORECARD BASICS ON IMPLEMENTATION
Executive Summary
The balanced scorecard is a management tool designed for organizational development that provides a concise picture of the overall organization in four quadrants: financial goals, customer perspective, internal processes and learning and innovation. All metrics should link back to key success factors and represent a balance among all stakeholders.
Because a balanced scorecard initiates a change process, many stumbling blocks can occur in implementation without strong leadership and top-down support. Experts suggest that organizations focus first upon results-based measures and then evolve into a "change-ready" culture. Identification of drivers and cause and effect relationships is essential to link short and long-term goals. Ongoing efforts to examine and re-examine strategies in an "if-then" format will help align strategies.
The most successful programs have involved use of carefully planned scorecards for projects or units of manageable size and scope. Scorecards should be well understood by all employees and backed by strong leaders.
Organizations must develop the scorecard to fit their needs. Major challenges occur when developing measures, simplifying the process, handling resistance to change, building in flexibility, communicating organizational weaknesses, gathering data, adapting technology to the process and benchmarking. Considerable time and expense is customarily invested to maintain top management support, keep the scorecard current, train staff and to maintain a positive organizational culture. Organizations that have not involved employees have not achieved desired results.
Background
The balanced scorecard is a management tool for organizational development and incentive programs developed by Robert Kaplan and David Norton in 1992. It is designed to give managers a fast, concise and comprehensive picture of both financial and operational measures. Ideally, a small number of critical measures are summarized in one management report. The process simultaneously allows significant operational areas to be examined to see whether one result may have been achieved at the expense of another.
Business consultants on organizational change, management and organizational development advocate that the scorecard is the only method for survival in today's environment. They claim that businesses must develop an overall method of measuring up to the competition and of adapting quickly to environmental conditions (e.g., demographics, economy, technology). Detailed environmental scanning, competitive analysis and meticulous ongoing scorecard planning is encouraged.
The scorecard presents the big picture while allowing managers to view critical operational factors and their interrelationships with current and future performance in mind. Emphasis is on the organizational vision and long-term success. (Robert Kaplan and David P. Norton, "The Balanced Scorecard--Measures that Drive Performance," Harvard Business Review, January-February, 1992.)
The balanced scorecard contains four main measurement categories or quadrants as follows:
Category Key Concepts & Basic Measures
Financial Goals How do we look to stakeholders? A range of measures from traditional accounting measures to sophisticated value-added measures linking managerial goals to stakeholder interests.
Customer Perspective How do customers see us? Responsiveness, quality, value added to customers through services or products, number of repeat customers, fewer errors, etc. See that surveys and questionnaires have an acceptable rate of return and validity.
Internal Processes What must we excel at? Performance in operations or production.
Learning and Growth Or Innovation Can we continue to improve and create value? How the organization develops and improves employee skills, knowledge, technology and information systems.
Balanced scorecards are being used successfully to measure performance on both a broad and narrow scope in the public and private sectors. Scorecards are being designed and implemented for varied purposes, for example:
• The State of Washington uses scorecards to measure overall organizational progress in line with strategic targets for the entire state.
• The Texas State Auditor's Office uses scorecards to measure progress on project management.
• GTE Power Systems uses a scorecard to measure web site usage and business conducted over the Internet at GE Power Systems. (Michelle Neely Martinez, "Get Job Seekers to Come to You," HR Magazine, August 2000.)
Identification of Drivers and “Cause and Effect” Relationships
True drivers for organizational performance should be identified for each category. Determination of drivers can be difficult. It is critical to expose key performance drivers because they provide insight as to what is at the heart of the organization. After key drivers are identified, cause and effect relationships must be pinpointed. Customized scorecards can be developed for all business levels right down to each individual. (McKenzie & Shilling, "Avoiding Performance Measurement Traps: Ensuring Effective, Incentive Design and Implementation,” American Management Association, July/Aug., 1998.)
In 1996 Kaplan and Norton set forth a vision and strategy model for the scorecard. After constructing over 100 scorecards, they concluded that financial and non-financial measures should originate with the unique strategy of a business unit for future success. Measures should relate specifically to desired results. The scorecard must provide a clear picture of what is needed for long-term success.
Norton and Kaplan stress the benefits of organizational learning and growth that can be achieved through use of the innovative quadrant on the scorecard. Continuing to examine cause and effect relationships and continually examining alignment with strategy are also recommended as best practices. Strategy may be set forth in an "if/then" format. For example, we could strategize that if we train headquarters staff about the employee suggestion award program, then they can teach the regional staff. If regional staff knows more about the suggestion program, then they will submit more suggestions. If we receive more suggestions, then the organization will save more money. In this case, measurements on training headquarters staff, the knowledge of regional staff about the program, the number of suggestions submitted and the amount of money saved can be taken for the scorecard. An innovative target measure may be to develop an educational web page, paperless process or a new focus group. Measures on drivers of performance unique to a business unit are essential for short-term review of progress. Kaplan & Norton also encourage forecasting a link from long-term to short-term financial measures so that the staff does not become discouraged by a long-term financial goal that may not reflect improvement over the short run. Subjectively and qualitatively building links from each non-financial measure to a financial measure can test the anticipated chain of drivers and outcomes. In this way strategies can keep pace with the external environment and the scorecard becomes a learning process. (Robert S. Kaplan and David P. Norton, "Linking the Balanced Scorecard to Strategy," California Management Review, Vol. 39, No. I, Fall, 1996.)
In Keeping Score, Mark Graham Brown states that the most important point to remember is that all metrics link back to key success factors and business fundamentals necessary for organizational success. All measures should represent a balance between the needs of stakeholders, customers and employees. In addition, measures should link the past and the future to demonstrate how well progress is being made towards the long-term vision. (Mark Graham Brown, Keeping Score, AMACOM, Quality Resources, 1996: 41-52.) Mr. Brown's Macro Process Model illustrates how to tie processes to performance. This illustrates how to be certain that all aspects of inputs, processing systems, outputs and outcomes relate to each long-term goal (Keeping Score: 96.)
Implementation Dos and Don'ts
In 1996, KPMG and a European professor engaged in a study of seven European companies that had implemented scorecards. Only 30 percent had achieved their original stated goals; however, the majority of them were satisfied with the results. KPMG concluded that a balanced scorecard is an expensive way to raise awareness. As a result, KPMG designed "The Ten Commandments of Scorecard Implementation." The commandments may be summarized in a do/don't format as follows:
Do:
• Know what you hope to achieve.
• Use the scorecard for implementation of strategic goals.
• Ensure goals are in place before the scorecard is implemented.
• Ensure that at least one top-level non-financial sponsor and line managers back the project.
• Implement a pilot before introduction.
• Carry out a pilot for each business unit before implementation for customization.
Don't:
• Use the scorecard for top-down control.
• Standardize the project with ready-made scorecards.
• Ignore training and communication.
• Overcomplicate the process or strive for perfection.
• Underestimate the extra administrative workload and cost.
• Leave the process to accountants or without top-down support.
(Liz Fisher, "Thou Shalt Not Fail, Balanced Scorecard Implementation, 10 commandments from KPMG," Accountancy International, September 1998.)
Avoid Balanced Scorecard Traps
All expert opinions agree that an organization must be clear on what it plans to achieve and the benefits that will be gained before beginning the process. (Paul McCunn, "The Balanced Scorecard . . . The Eleventh Commandment," Management Accounting: Magazine for Chartered Management Accountants, Vol. 76, Issue 11, December 1998.)
Managers must:
• Be certain that goals are consistent and compatible. For example, goals for fast production and developing more innovations may confuse staff. See that long-term and short-term goals are consistent.
• Allow time for communicating goals and measures. Allow time for obtaining feedback from employees. Basic scorecard structure may take five-six months to develop with total completion in about one year.
• Correctly determine weights and leverage for each measure.
• Combine implementation with interaction, communication and good management.
• Measure the root of the issue that is within the control of program participants; for example, to measure customer satisfaction, use number of repeat customers, fewer errors, etc. Satisfied customers may not always complete a survey.
• Focus on fewer overall measures.
(McKenzie & Shilling, “Avoiding Performance Measurement Traps: Ensuring Effective Incentive Design and Implementation,” American Management Association, July/Aug. 1998.)
Scorecard Implementation in Government
Jonathan Walters, author and editor of Governing Magazine, points out that most governmental agencies must measure performance to comply with the federal Government Performance and Results Act (GPRA). Measures are essential to attain federal funding, to attain more flexible laws or regulations, to attain staffing and for survival of any organization in today's environment. (Jonathan Walters, Measuring Up, Washington, D.C.: Governing Books, 1998.)
The balanced scorecard must be well understood throughout the organization. The tendency to focus upon internal processes must be avoided. Results should be communicated to all employees to achieve understanding and real value-added. To add value and avoid pitfalls
In summary, it may be concluded that actions that contributed to success were as follows:
1. Strong leadership supporting the process.
2. Top-down support.
3. Identifying key areas, drivers and strategies that will lead to cost savings or otherwise fulfill the mission of the organization.
4. Facilitating review of surveys and data by experienced statisticians to demonstrate credibility of the process.
5. Establishing meaningful comparison of historical data.
6. Comparing accurate figures to benchmarks.
7. Keeping initial balanced scorecard training simple to achieve understanding by all employees.
8. Sharing scorecard targets and information with all staff at all levels.
9. Using Baldridge assessments or customized HR assessments.
10. Implementing change management techniques with scorecard implementation, e.g., over-communicating, ongoing, real-time training and employee involvement.
11. Understanding that the scorecard elicits resistance and knowing that resistance to change is bound to occur.
12. Expecting a culture change first then numerical results second.
13. Building flexibility into the system to adjust targets after implementation.
Dhole
From India, Delhi
Leo's artilcle is really great and taking it further, bellow find a detail on Balance score card approach
BALANCED SCORECARD BASICS ON IMPLEMENTATION
Executive Summary
The balanced scorecard is a management tool designed for organizational development that provides a concise picture of the overall organization in four quadrants: financial goals, customer perspective, internal processes and learning and innovation. All metrics should link back to key success factors and represent a balance among all stakeholders.
Because a balanced scorecard initiates a change process, many stumbling blocks can occur in implementation without strong leadership and top-down support. Experts suggest that organizations focus first upon results-based measures and then evolve into a "change-ready" culture. Identification of drivers and cause and effect relationships is essential to link short and long-term goals. Ongoing efforts to examine and re-examine strategies in an "if-then" format will help align strategies.
The most successful programs have involved use of carefully planned scorecards for projects or units of manageable size and scope. Scorecards should be well understood by all employees and backed by strong leaders.
Organizations must develop the scorecard to fit their needs. Major challenges occur when developing measures, simplifying the process, handling resistance to change, building in flexibility, communicating organizational weaknesses, gathering data, adapting technology to the process and benchmarking. Considerable time and expense is customarily invested to maintain top management support, keep the scorecard current, train staff and to maintain a positive organizational culture. Organizations that have not involved employees have not achieved desired results.
Background
The balanced scorecard is a management tool for organizational development and incentive programs developed by Robert Kaplan and David Norton in 1992. It is designed to give managers a fast, concise and comprehensive picture of both financial and operational measures. Ideally, a small number of critical measures are summarized in one management report. The process simultaneously allows significant operational areas to be examined to see whether one result may have been achieved at the expense of another.
Business consultants on organizational change, management and organizational development advocate that the scorecard is the only method for survival in today's environment. They claim that businesses must develop an overall method of measuring up to the competition and of adapting quickly to environmental conditions (e.g., demographics, economy, technology). Detailed environmental scanning, competitive analysis and meticulous ongoing scorecard planning is encouraged.
The scorecard presents the big picture while allowing managers to view critical operational factors and their interrelationships with current and future performance in mind. Emphasis is on the organizational vision and long-term success. (Robert Kaplan and David P. Norton, "The Balanced Scorecard--Measures that Drive Performance," Harvard Business Review, January-February, 1992.)
The balanced scorecard contains four main measurement categories or quadrants as follows:
Category Key Concepts & Basic Measures
Financial Goals How do we look to stakeholders? A range of measures from traditional accounting measures to sophisticated value-added measures linking managerial goals to stakeholder interests.
Customer Perspective How do customers see us? Responsiveness, quality, value added to customers through services or products, number of repeat customers, fewer errors, etc. See that surveys and questionnaires have an acceptable rate of return and validity.
Internal Processes What must we excel at? Performance in operations or production.
Learning and Growth Or Innovation Can we continue to improve and create value? How the organization develops and improves employee skills, knowledge, technology and information systems.
Balanced scorecards are being used successfully to measure performance on both a broad and narrow scope in the public and private sectors. Scorecards are being designed and implemented for varied purposes, for example:
• The State of Washington uses scorecards to measure overall organizational progress in line with strategic targets for the entire state.
• The Texas State Auditor's Office uses scorecards to measure progress on project management.
• GTE Power Systems uses a scorecard to measure web site usage and business conducted over the Internet at GE Power Systems. (Michelle Neely Martinez, "Get Job Seekers to Come to You," HR Magazine, August 2000.)
Identification of Drivers and “Cause and Effect” Relationships
True drivers for organizational performance should be identified for each category. Determination of drivers can be difficult. It is critical to expose key performance drivers because they provide insight as to what is at the heart of the organization. After key drivers are identified, cause and effect relationships must be pinpointed. Customized scorecards can be developed for all business levels right down to each individual. (McKenzie & Shilling, "Avoiding Performance Measurement Traps: Ensuring Effective, Incentive Design and Implementation,” American Management Association, July/Aug., 1998.)
In 1996 Kaplan and Norton set forth a vision and strategy model for the scorecard. After constructing over 100 scorecards, they concluded that financial and non-financial measures should originate with the unique strategy of a business unit for future success. Measures should relate specifically to desired results. The scorecard must provide a clear picture of what is needed for long-term success.
Norton and Kaplan stress the benefits of organizational learning and growth that can be achieved through use of the innovative quadrant on the scorecard. Continuing to examine cause and effect relationships and continually examining alignment with strategy are also recommended as best practices. Strategy may be set forth in an "if/then" format. For example, we could strategize that if we train headquarters staff about the employee suggestion award program, then they can teach the regional staff. If regional staff knows more about the suggestion program, then they will submit more suggestions. If we receive more suggestions, then the organization will save more money. In this case, measurements on training headquarters staff, the knowledge of regional staff about the program, the number of suggestions submitted and the amount of money saved can be taken for the scorecard. An innovative target measure may be to develop an educational web page, paperless process or a new focus group. Measures on drivers of performance unique to a business unit are essential for short-term review of progress. Kaplan & Norton also encourage forecasting a link from long-term to short-term financial measures so that the staff does not become discouraged by a long-term financial goal that may not reflect improvement over the short run. Subjectively and qualitatively building links from each non-financial measure to a financial measure can test the anticipated chain of drivers and outcomes. In this way strategies can keep pace with the external environment and the scorecard becomes a learning process. (Robert S. Kaplan and David P. Norton, "Linking the Balanced Scorecard to Strategy," California Management Review, Vol. 39, No. I, Fall, 1996.)
In Keeping Score, Mark Graham Brown states that the most important point to remember is that all metrics link back to key success factors and business fundamentals necessary for organizational success. All measures should represent a balance between the needs of stakeholders, customers and employees. In addition, measures should link the past and the future to demonstrate how well progress is being made towards the long-term vision. (Mark Graham Brown, Keeping Score, AMACOM, Quality Resources, 1996: 41-52.) Mr. Brown's Macro Process Model illustrates how to tie processes to performance. This illustrates how to be certain that all aspects of inputs, processing systems, outputs and outcomes relate to each long-term goal (Keeping Score: 96.)
Implementation Dos and Don'ts
In 1996, KPMG and a European professor engaged in a study of seven European companies that had implemented scorecards. Only 30 percent had achieved their original stated goals; however, the majority of them were satisfied with the results. KPMG concluded that a balanced scorecard is an expensive way to raise awareness. As a result, KPMG designed "The Ten Commandments of Scorecard Implementation." The commandments may be summarized in a do/don't format as follows:
Do:
• Know what you hope to achieve.
• Use the scorecard for implementation of strategic goals.
• Ensure goals are in place before the scorecard is implemented.
• Ensure that at least one top-level non-financial sponsor and line managers back the project.
• Implement a pilot before introduction.
• Carry out a pilot for each business unit before implementation for customization.
Don't:
• Use the scorecard for top-down control.
• Standardize the project with ready-made scorecards.
• Ignore training and communication.
• Overcomplicate the process or strive for perfection.
• Underestimate the extra administrative workload and cost.
• Leave the process to accountants or without top-down support.
(Liz Fisher, "Thou Shalt Not Fail, Balanced Scorecard Implementation, 10 commandments from KPMG," Accountancy International, September 1998.)
Avoid Balanced Scorecard Traps
All expert opinions agree that an organization must be clear on what it plans to achieve and the benefits that will be gained before beginning the process. (Paul McCunn, "The Balanced Scorecard . . . The Eleventh Commandment," Management Accounting: Magazine for Chartered Management Accountants, Vol. 76, Issue 11, December 1998.)
Managers must:
• Be certain that goals are consistent and compatible. For example, goals for fast production and developing more innovations may confuse staff. See that long-term and short-term goals are consistent.
• Allow time for communicating goals and measures. Allow time for obtaining feedback from employees. Basic scorecard structure may take five-six months to develop with total completion in about one year.
• Correctly determine weights and leverage for each measure.
• Combine implementation with interaction, communication and good management.
• Measure the root of the issue that is within the control of program participants; for example, to measure customer satisfaction, use number of repeat customers, fewer errors, etc. Satisfied customers may not always complete a survey.
• Focus on fewer overall measures.
(McKenzie & Shilling, “Avoiding Performance Measurement Traps: Ensuring Effective Incentive Design and Implementation,” American Management Association, July/Aug. 1998.)
Scorecard Implementation in Government
Jonathan Walters, author and editor of Governing Magazine, points out that most governmental agencies must measure performance to comply with the federal Government Performance and Results Act (GPRA). Measures are essential to attain federal funding, to attain more flexible laws or regulations, to attain staffing and for survival of any organization in today's environment. (Jonathan Walters, Measuring Up, Washington, D.C.: Governing Books, 1998.)
The balanced scorecard must be well understood throughout the organization. The tendency to focus upon internal processes must be avoided. Results should be communicated to all employees to achieve understanding and real value-added. To add value and avoid pitfalls
In summary, it may be concluded that actions that contributed to success were as follows:
1. Strong leadership supporting the process.
2. Top-down support.
3. Identifying key areas, drivers and strategies that will lead to cost savings or otherwise fulfill the mission of the organization.
4. Facilitating review of surveys and data by experienced statisticians to demonstrate credibility of the process.
5. Establishing meaningful comparison of historical data.
6. Comparing accurate figures to benchmarks.
7. Keeping initial balanced scorecard training simple to achieve understanding by all employees.
8. Sharing scorecard targets and information with all staff at all levels.
9. Using Baldridge assessments or customized HR assessments.
10. Implementing change management techniques with scorecard implementation, e.g., over-communicating, ongoing, real-time training and employee involvement.
11. Understanding that the scorecard elicits resistance and knowing that resistance to change is bound to occur.
12. Expecting a culture change first then numerical results second.
13. Building flexibility into the system to adjust targets after implementation.
Dhole
From India, Delhi
Hi Leo,
I just went through the information published by you. Thanks a ton. TREMENDOUS is just not the word. You are simply great with that extra knowledge completely filled in brain. We are glad we have someone like you in this informative site and industry today which helps people like us who have an urge to learn and explore the ocean of HR.
Thanks one again and keep going!!!!
Regards,
Vinitha
From India, Bangalore
I just went through the information published by you. Thanks a ton. TREMENDOUS is just not the word. You are simply great with that extra knowledge completely filled in brain. We are glad we have someone like you in this informative site and industry today which helps people like us who have an urge to learn and explore the ocean of HR.
Thanks one again and keep going!!!!
Regards,
Vinitha
From India, Bangalore
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